ICICI Securitie's research report on Thyrocare Technologies
Pathology revenue was up 16.4% YoY (-0.1% QoQ) to INR 1.4bn. Franchise business grew 11% YoY. Restructuring of franchise business is yielding results. Improvement of mix of big franchisee to small franchisee (added 600 large franchise YoY) is driving growth and it is likely to drive 10-15% growth in FY25E. Partnership business grew 29% YoY, barring sales from API holdings (parent) and B2G business, growth stood at 41% YoY. Normalised margin for pathology segment stood at 31.4%, down 140bps YoY (+560 bps QoQ); radiology sales grew 15.7% YoY to INR 130mn while margins stood at 10.0% down 250bps YoY (+100bps QoQ). In the near term, partnership business may continue to grow faster than franchise business. Bundled wellness package ‘Jaanch’ grew 25% YoY. The company is also introducing new bundled test package with high value and specialised tests. In Q1FY25, it commenced operations in Tanzania, investing INR 40mn (50% stake in JV) so far.
Outlook
Thyrocare Technologies (Thyrocare) has reported a strong 16.4% YoY growth in pathology segment in Q1FY25 in otherwise a seasonally weak quarter. The company had started restructuring of its franchisee business in May’23 which is yielding results as sales contribution from larger franchisee is growing at a faster pace (added 600 franchises in past 1 year) while partnership business (excluding API & B2G) grew 41% YoY in Q1. The newly launched bundled test package ‘Jaanch’ grew at 25% YoY. EBITDA margin expanded 140bps to 27.2% mainly driven by operating leverage and lower ESOP cost. Management expects EBITDA margin in 27-30% range in FY25. We raise FY25/26E EBITDA by 5% each and earnings by 11-12% to factor better margins. Maintain BUY with DCF-based revised TP of INR 825.
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